Why You Need to Play War Games

By Paul J. H. Schoemaker | Yahoo Small Business

The military hones its strategies with role-playing simulations. The technique can help your business, too--but you have to make it realistic.

Before the SEALs raided Osama bin Laden’s hideout, they worked for months on their strategy, studying satellite pictures of his compound, constructing a detailed model of the buildings and rehearsing exactly how the mission would unfold. A key part of the preparation was to have some participants play the role of the enemy--to simulate how the defenders would react, so the SEALs could remain one step ahead.

In our consulting business, we encourage clients to do simulations in their business strategizing. We call it war-gaming--because metaphorically, that’s what it is. It serves exactly the same purpose as for the SEALs.

For example, one client, a pediatric hospital, was grappling with how to respond to rapid consolidation in their metro area. Larger hospitals with adult patients were actively looking to merge or form strategic alliances. To prepare, the hospital CEO engaged his board in a simulation in which board members teamed up in roles as the market’s five major competitors. Each team was given wide latitude to explore possible alliances or mergers over the next two years. Thanks to the simulation, the executive team quickly realized that their most direct pediatric competitor would likely want to merge if certain adult hospital mergers were to occur. As it happened, one such major consolidation was announced just a week after the simulation. The CEO and board were aligned and ready to act. They quickly approached the other pediatric hospital about teaming up and seized an opportunity that might otherwise have been lost.

Five steps to a good simulation.

The key to a productive simulation is that the players submerge themselves deeply into the business realities and mindsets of each competitor. If not, the game will fail to yield strategic insights. War-games are as much about the preparation for the simulation as as about the performance of the simulation itself (remember garbage in = garbage out). To get this right, make sure you do the following well:

1. Study each main competitor. Examine their past actions, behavioral foot-print and mindsets. Try to involve people who used to work for the competition or know them well. All this homework should result in what we call a briefing book.

2. Know your opponents. Get into the mind of the top leaders by examining past decisions and quotes and commentary. Tap into your Board or leadership networks to gain inside feels for CEO and other executives of each rival (strengths, weaknesses, ambitions, fears, hopes, etc.)

3. Vary the simulations. First, outline the most likely industry dynamics and run that as simulation 1. Then throw in some key shifts in the environment or competitive scene for simulation 2. This iteration should challenge the status quo and truly foster new thinking compared to the simulation 1. Repeat with even more unusual scenarios depending on the complexity of the market or industry.

4. Keep decision logs. Capture all team decisions, alternatives considered, presumed competitor reactions, triggering events, etc. Also, note the confidence level of each team in role-playing their assigned competitor. Teams need to move quickly and align on multiple decisions in short periods of time. This in turn tests confidence, comfort level with the data, and team dynamics.

5. Hold dress rehearsals. Each team should meet in character a few times before the simulation day itself to review recent relevant events and become comfortable with each other. If you have to look up information about your competitor, about products, channels, finances etc, during the actual role playing session, the game bogs down and the value of the simulation is diminished. Wearing clothing characteristic of the simulated rival, assigning C-suite roles such as CEO, VP Marketing, and wearing name badges with titles are good ways to stimulate the teams. You can stop short of singing the company songs.

Old scripts can kill you.

Old ways of thinking in today’s “new normal” can be truly dangerous. The same old scripts, with the same old players, will not suffice. You need to think about unexpected events, black swans and unfamiliar choices. Are you prepared for these? Probably not, and this is why war-games can pay off big in business. A little bit of play-acting before major market shifts can prevent a lot of unproductive drama afterwards. So, get into your role, get other participants involved and let the war games begin.